Decommissioning seems to be the word on everyone’s lips in the oil and gas sector. Shell’s announcement of plans to remove facilities in the Brent field was closely followed by Nicola Sturgeon’s announcement of a £5 million Scottish Government fund to support decommissioning projects.
With all this talk, some people might be forgiven for having the impression that the days of new exploration and extraction are coming to an end. Unite is clear – that is simply not the case.
We need immediate action to support the oil and gas sector – supporting a roadmap based upon clear principles which deliver certainty for the industry. Genuine co-operation between government, industry and trade unions is vital, to alleviate the pressure on the sector while supporting jobs and protecting employment rights.
As Scotland’s largest offshore union, we have repeatedly called for the UK and Scottish governments to pull together an industry summit which would regularly meet until the crisis abates. In our opinion, support for the industry should include but not be limited to, urgent action on government revenues from offshore oil and gas. The Treasury has a range of taxes that impact on the industry, most notably the Supplementary Charge on Corporation Tax, which reflects the exceptional profits the industry made in the boom years – but the forthcoming years hold little prospect of significant profits or tax receipts from the North Sea.
The offshore sector cannot be left exclusively to market forces. The sector is of vital economic interest and paramount to the security of supply. There is a national interest to be taken into account. The UK and Scottish governments have been slow in response to the deteriorating situation. The industry needs to have confidence that they can invest for the future, and certainty about the fiscal framework for a sustained period to see it through the current crisis.
While tax changes are a necessary component in the strategy, they won’t be enough to stop the decline. If activity is to be maintained, the industry needs an injection of fresh capital. The Oil and Gas Authority has a strong mandate to maximise production, but we need more imaginative policies – including the use of Scottish and UK government borrowing powers to leverage money into the sector. That should include public stakes in new infrastructure and to support existing facilities.
On February 23 a cross-party motion supporting that approach – put forward by Lewis Macdonald MSP – will be debated in the Scottish Parliament. Our members will be watching that debate with interest. We look forward to hearing what the Scottish Government has to say.
Decommissioning is, of course, a major emerging issue. Unite strongly believes that a coherent plan must be established to ensure as much of the work as possible is retained in Scotland – and the UK. The Oil and Gas Authority is tasked with developing a plan and timetable for developing the infrastructure that will support decommissioning. It is estimated that until the mid-2050s, around 470 platforms, 5,000 wells, 10,000km of pipelines and 40,000 concrete blocks will have to be removed from the North Sea. Oil and Gas UK projects estimates that decommissioning costs through to the 2050s will range between £30 – £60 billion.
However, the Oil and Gas Authority Report titled ‘Decommissioning Strategy’ published in June 2016 says there needs to be, “a clear strategy and a delivery programme, with concerted effort and strong stakeholder commitment across the industry.” Unite supports this objective – because at the moment there is no clear strategy for decommissioning in Scotland. We need one now – and it has to involve the trade unions directly.
The Scottish and UK governments must both intervene in order to explore the opportunities to leverage investment into the decommissioning process, including state borrowing powers to offset a lack of investment by the private sector. That will help address capacity issues and reduce decommissioning costs.
But while planning for future decommissioning, we should not take our eyes off the prize. Our focus must remain on extracting maximum economic benefit from the estimated 22 billion barrels of oil and gas still in the UK Continental Shelf.
Pat Rafferty is the Scottish secretary of Unite the union.